 Hello and let's talk about auto sales in India. Over the past few months there has been a buzz around the sales of cars, two-wheelers and three-wheelers increasing and this has been portrayed as a sign of the economy bouncing back. After all, if people are buying vehicles, things must be good, right? However, some numbers have recently come out that have raised doubts about these claims. Turns out the actual sales of the auto sector is not doing that well. Now industrialist Rajiv Bajaj pointed this out and was hit by an avalanche of criticism from the right-wing media and its supporters, some of whom even accused him of insider trading. So what's really happening here? Are people actually buying more vehicles? And what does this mean? And what does the answer to this question mean for India's economy? We talk to senior journalist Anandya Chakravarthy to find out. Thank you Anandya for joining us. So over the past few weeks we have sort of discussed how auto sales, they often come in our discussions as one key factor while measuring some of the where the economy is doing well or bad and it's usually a fairly well accepted trend. So this time, October's numbers on the face of it seem to be an improvement. So what do you think of that? Yes, in fact, one of the things that auto has been seen as a driver of various other sectors as well because internationally, if you look at it, American capitalist model was often based on auto. So you give Philip to the auto sector, then you have various other things growing around it. Hotels for instance, then tourism, sale of fuel, everything, tires, car mechanics. So auto is something that people watch. Of course auto manufacturers exaggerate and say that we employ so many people, most of India as if they apply, which is not true. But nevertheless, there are many people dependent on the auto sector as a whole. So every time the auto sector does well, we need to take a look at it seriously because we did take a look at it very seriously when it was doing very badly last year. If you remember, it was at some five, six year low. Various months, we saw that the lowest since 2016. So last year was a very bad year for the auto companies. This year, of course, the sales numbers are very, very good. I'm talking about September and last two months that we have numbers for. Now here is of course a health warning here when sales numbers are usually reported in the beginning of the month, the second or third of November. You get sales numbers from most of the car and two wheeler manufacturers and of course truck and tractor manufacturers as well. And business news channels, economy news channels and also in general, journalists track it very closely. Analysts track it very closely to get a sense what is happening in terms of consumer sentiment. And this year, despite the lockdown, despite COVID, sales from companies, which is wholesale, basically factories pushing out to retail, has been a record. It's not been seen. People were saying this is going to be worse than 2019. It's turned out to be much better than 2019, even better than 2018. So therefore, definitely on the face of it, the wholesale numbers, production numbers are very, very encouraging for auto companies. But on the face of it is the keyword. Whenever we say on the face of it, there has to be some catch. There has to be a catch. So this context just wanted to bring you to something Rajeev Bajaj said. And this was a controversy, of course, at the end of last month, the end of October and beginning of November. And Rajeev Bajaj said that he was quite disappointed with the sector, with the performance of his company specifically. And then there was an outburst from sections of the right wing media establishment. People were calling him out for illegal stuff. And there was this whole thing that the numbers are great. So why are you complaining? But so in this case, what exactly is the actual number we're talking about? So let's start with Rajeev Bajaj's own point. I think that he was very particular. He meant sales from dealerships. Because he did quote what is called the FADA numbers. FADA is association of dealers. So he wasn't talking about what the wholesale production is, what he's pushing out from his factory. He was talking about what has been picked up from dealerships. Because you can make whatever you want. Because I remember that every year I make food on festivals and it runs out. And sometimes I make extra and that many people don't turn up. So how much food I make is not the correct gauge to decide whether my food is being eaten. So just because you're producing something doesn't mean it is being bought. That is the point that Rajeev Bajaj was trying to make. And I think that as we see that he was essentially correct. Because just look at the data. It is true that within the few days when I think 2nd of November the data came out. There were allegations of insider trade. That he misled the market by lying about the numbers. He knew about it on 26th of October that there have been record sales. And despite that he was saying that he's disappointed. But when the actual sales numbers came out they were record. So he must have tried to make some money out of it. Of course as we know Rajeev Bajaj has been pretty outspoken like his father. And therefore the establishment which is essentially a pro-government establishment and the right wing establishment does not like it. So they're always out to catch out that he's made a mistake or he's lying. In some cases we saw some luminaries of the right wing of the BJP firm and saying that effectively that he's lying to blame Modi and create a fear psychosis amongst people. And then the economy is really doing extremely well because look at it. Karthik it's so fantastic. But let's look at the dealership numbers and that's where Fada comes in. Which is the dealership authority. So I'm going to take the data which is given by Siam. Which is the auto manufacturers association. And they give you for all the top auto manufacturers. What has been produced and sent out a dealership. And we're going to compare that with Fada's data. Which is not the entire data. It covers about 1250 out of 4,960 odd RTOs where registration takes place. It leaves out two big states under Pradesh and multiplication to small states. But you can still compare like to life. Apples to Apple. So if Fada's data cover covers 95% of the overall retail sales. Because that's most of the sales we know takes place in metro. So if it covers 95, 96% that's true for this year as well. There would hardly be any difference. So let's just look at Fada's data for October. And we take first cars. Because that is an interesting thing to look at. And in October if we look at it. Car production or that which was pushed out from the factories to retailers. Went up by 14%. This is a dramatic growth because it looks like this is fantastic. In a year with COVID you've gone up 14%. When really the demand should have not been there at all. Even if there was pent up demand it shouldn't have been there. And this comes on the back of a 10% growth in the previous month in September. So that itself is pretty good. Now let's look at Fada's data for retail as in sales from dealerships. And this is where it's interesting. Because in October retail sales went down by 9%. That is the important point to see. So you look at it in the passenger vehicle segment. If we look at it the sales went down. If it was 100 it went down to 92. And to 91 actually from 100 to 91 approximately. And if you look at the wholesale then it actually went up from 100 to 140. So last year as well the total numbers were not sold. About 90 or 93% of what was pushed out was sold. This year more has been pushed out and less has been sold. So we're seeing a clear inventory build up taking place in dealerships. Yes of course this year November Diwali was in the middle of November. Last year I think it was at the end of October. So there's a difference. So you will see that difference. Maybe towards the end of October dealers were taking cars and keeping it with themselves because they expected a sharp rise in. I'm not saying again I'm not saying that it is not possible that when we get the November numbers we will see that that inventory has been sold. But just going by the sales from factories we cannot yet decide that the economy is doing very well and Rajeev Bajaj is telling a lie. So Rajeev Bajaj of course is not cars. He is in two-wheelers bikes and three-wheelers. So let's look at two-wheelers. In October two-wheelers which is bikes, mopeds and scooters. The factory output and which was sent out to dealers went up by 17% this October and that is what is the record sale number that we're seeing for Hero, Bajaj are two big players and then Honda and all. Everyone has seen a big growth, 17% growth. What is the change in retail sales? What is the change in dealerships? Well it's gone down by 27%. So it is down by 27%. So we're seeing that whatever inventory was there in October they could not sell them. The dealers could not sell them. Their sales have gone down. Yes, they're built up inventory. Will that inventory be cleared? Has it been cleared by Diwali? We don't know. We don't have that information yet. We'll only get to know. Maybe we'll get to know in a couple of days the mid-month review. Someone will be able to tell us. So Rajeev Bajaj was saying exactly the correct thing. He had said two things. One is that the dealership information pipeline tells us that people are not buying what we are producing. Secondly, in the lower segment, in the 100cc segment, I hope that is lower. I know nothing about bikes. Worst person to ask about the auto sector. Yeah, I know the numbers but I can't drive sadly. But the point is that I think there are 350cc which are the bigger bikes. So the 100cc segment, which is what the poorer people buy, that hasn't done well. That is what Rajeev Bajaj was saying. And of course, we've discussed this in the past as well Prashant. People will buy things for personal transport. And even cutting into the savings and actually at the risk of taking huge loans because that's the security. And that's what the pandemic has done. It basically brought it down to a situation where you have to take private transport. Exactly. And we see that being mirrored when it comes to three-wheeler. And that is interesting because three-wheeler production, again mainly Bajaj Auto here and I think there are a few others. Three-wheelers, you look at it, both factory and retail have gone down sharply. So in factory output, we are seeing a 61% decline. And in retail sales, we are seeing a 65% decline. So if 103-wheelers were being made in October 2019, only 30 odd, what did I say? I said about a 60% decline, that's 61%. So about 38, 39 odd are being made, three-wheelers were made in October. And if 100 was sold, only 35 were sold in October 2020. Clearly, there is no demand for three-wheelers because no one is taking public transport. We're hearing similar stories from Maruti for instance. Maruti makes a few, I think, specific models which is aimed at that entire radio cab, the Ola Uber, guys. And they are worried they're not going to be able to sell them. So they're trying to work out some way to sell them in some other method to be able to continue to produce and sell those cars. So that's and also give discount. So clearly, we're seeing a decline in public transport. So you will see cars and scooters being bought more. And bikes being bought. But that obviously does not tell you much about the economy, Prashant. Precisely, absolutely. So we're pretty much in a situation where we're kind of saying that at least sections of the right wing that because we have a lot of rice and grain in our go-downs, people are not really hungry in India anymore. Something on those lines actually. Exactly, that's a great analogy, exactly. And also, one has to remember that historically, we've taken the auto sector's growth independently of the growth of the public transport, right? Absolutely. So people have switched away from public transport as they got well there. So I mean, even with all the cars in this country, we sell about 5 or 1,000,000 cars a month. It's not really setting the world on fire. 60 or 1,000,000 cars a year is not really dramatically high. I mean, I guess it's lesser. In these months, it's higher usually. But so it's still a very small population, which are car owners. Many have more than one car in metros. And therefore, that was always a sign of affluent, so of growing market of the affluent people. But now that is not true anymore. And that is the point to keep in mind that if the auto sector rises, it is at the cost of something else because people are using their savings to buy these cars or taking loans to buy these cars because they are scared they can't go out in public transport anymore. Absolutely. And in the absence of any real policies as far as investment in public transport, large-scale investment is concerned. And especially keeping in mind this pandemic, it really actually makes the situation worse for people from the lower middle class and for the poorer sections as well. Absolutely. Absolutely. In fact, many people from the lower middle class would have to, I would have thought, would have had to buy cheaper bikes, more pageant scooters. And if that has not picked up, that tells you the situation is really grim when it comes to employment or the fact that they're not being able to go to places to work anymore. So that is a crucial thing to look at. And of course, one has to wait for the November data, frankly, because Diwali is here. And maybe only then we'll know what the retail sales is all about. But as of now, retail sales are lower than last year. And that itself was very bad because retail sales last year were also lower compared to 2015-16, which means that it was on a downward trend and not higher. So it's like a, it's a double whammy because retail sales are not only lower, they are lower at a time when they should ideally have been higher, even at whatever social disturbance it caused. Right. Absolutely. Right. Thank you so much, Anandya, for talking to us. Thanks a lot, Prashan. That's all we have time for today. We'll be back on Monday with more news from India and the world. Until then, keep watching NewsClick.